PRICING
Price represents the exchange value of a product or a service.
The higher the buyer perceives the value of the product, the more they are willing to pay for it.
click to edit
Lamb 2003, price is that which is given up in an exchange to acquire a good or a service.
Kotler 1996, pricing as the process of determining the value of a product or service to consumers at a particular time in quantitative terms of dollars and cents
FARE – for use of air, road, railway or taxi services
RENT – use for apartment or a house
INTEREST is for banking charges on loans
CREDIT TERM – premium for insurance coverage
PRICING OBJECTIVES
click to edit
Marketing firm need to decide what they want to accomplish with a particular product.
Companies objectives is to MAXIMIZE PROFITS.
It is important for marketers to set the right pricing objective.
click to edit
4 internal factors affecting pricing decisions.
SALES ORIENTED PRICING OBJECTIVES
STATUS QUO PRICING
click to edit
Profit Maximization: marketers aim to make maximum profit in the current financial performance.
Marketers need to set the right price, so that total revenue is as large as possible relative to total cost.
Here doesn’t means that charging the customer higher price.
The company may need to estimate the demand and costs associated with alternative price
Satisfactory Profit: means a marketer set a price that give them reasonable level of profits. It must be satisfactory and agreeable to the stockholders and management.
click to edit
SALES ORIENTED PRICING OBJECTIVES
c. STATUS QUO PRICING
Marketers may use the ‘STATUS QUO PRICING’.
It is a pricing objective that help firms maintain existing prices or meets the competition’s prices.
When firms compete within an established price leader, they are safe if they follow the leader’s price.
This means the price will be close to other competitors or it may even be a comparable price
click to edit
Target Return On Investment: ROI is a popular profit pricing objective among many companies. With ROI, firms calculate their return on total asset.
It aims to measure the overall effectiveness of the marketing management in generating profits by utilizing its available assets.
ROI = Net Profits after taxes
Total Assets